how to turn a $billion into 2c?

So How Did This Happen?

On just one front alone, if you look at a timeline and then a chart it becomes pretty interesting … doesn’t it?

LDM join’s NXS, followed thereafter by DV

Then it gets interesting:

2013 14 May:

NXS “amends” it’s GSA with STO, restructuring Longtom gas output. Some point out that the new GSA actually "appears" to cap Longtom output and therefore free cashflow to NXS for up to 2 years. (Was this subsequently spelt out in the open briefing on June 3rd? See below)

Yet am I wrong in thinking that the new GSA appeared to be marketed by the Company as an increase in output?

But here’s the “Crux”: In the announcement to the market re the “new” GSA the following statement is included:

“ The agreement is subject to certain conditions being satisfied or waived by 30 June 2013. These include Nexus obtaining funding for the required work program to satisfy the supply requirements (which may be satisfied or waived by Nexus), and Santos confirmation of the capacity to accommodate Longtom-5 into the existing subsea infrastructure (which may be satisfied or waived by Santos).”

The Share price on the day of the announcement was 13.5-14c.

Following on from the “condition” requiring funding by June 30th the SP tanked… surprised?

Then on the 3rd of June LDM said the following in an open briefing to the market:

MD and CEO Lucio Della Martina:

“ The new HOA (subject to satisfaction of conditions comes into effect on 1 July 2013) will achieve this objective. For Nexus shareholders the key benefit will be an enhancement of Longtom’s value.

This is driven by:

• An increase in the net cash flow generated by Longtom over the contract term through to the end of CY2018;
• A superior production profile with accelerated production and revised pricing structure between FY2015 and FY2018;”

Note the “increase” begins in 2015 … so there again is the almost 2 years of “reduced” output/cashflow prior to that?

Then the briefing included the following:

openbriefing.com

The HOA is subject to certain conditions, one of which is that Nexus obtain funding for the work program required to satisfy the supply requirements of the HOA, including drilling the Longtom-5 well and the workover of Longtom-4. What is your level of confidence that Nexus will be able to secure funding by the deadline of 30 June?

MD and CEO Lucio Della Martina

The condition in the HOA with respect to funding is for Nexus’ benefit, and is one in which we have the ability to waive. So in practical terms, there has never been a requirement to secure funding for the Longtom work program before 30 June 2013. It is our intention to waive the funding condition with the funding requirements for Longtom 5 being addressed under the medium term funding strategy.

Sorry, what was that?:

"in practical terms, there has never been a requirement to secure funding for the Longtom work program before 30 June 2013"

wow!

By then ie the 3rd of June, just 2 weeks post the big announcement of the new “GSA”, the Share price was trading at : 9.4c.

So did the company “err” by suggesting funding was required in a (ridiculously short?) 6 week time frame only to then effectively suggest it wasn’t actually needed at all... just TWO weeks later?

Depends I guess on whether you think the 40% fall in the SP in the 2 week intervening period coupled with the apparent “reduced” rather than increased production profile/cashflow from Longtom limited its future options and destroyed the SP once and for all…

I also know there were some very interesting conversations around these points at the AGM too… (BTW anyone else feel a little nervous when one director missed the AGM?)

Now its not for me to say but I know at least one shareholder (perhaps a more cynical one) who suggested that an agreement that "appeared" to reduce the free cash flow for up to 2 years, while tying it to a "very" short dated funding requirement that subsequently smashed the SP (and arguably removed any possibility of a CR at a reasonable price) for a company WITH HUGE DEBT AND LIABILITY ISSUES, at the mercy of a project with a history of unreliability, was asking for Trouble.

(And lets not even start on all those supposed bids for NXS assets that fell by the wayside over the years, the Cottee "saga", the Fowler years, Chook.. etc, etc, shall we?)

Now I’m not suggesting that anyone has done anything illegal, corrupt, unethical or even just plain dumb… but it is interesting isn’t it?

So somehow a company that once bragged about its billions of dollars in assets has managed to sell itself for ... 2c?

While I managed to avoid this “turn of events” and actually made money out of NXS over the years I know quite a few who have been taken to the cleaners on this one.

And it hurts, badly.. kinda like UMC and … and…

And yes you can’t blame seven for doing what they’ve done (unless you're a NXS shareholder) After all Ferguson alluded to their interest in quality assets… and everyone knows Kerry NEVER over pays.

Oh btw Taipan .. you were right.

STRICTLY my opinion only.

Here's the chart: